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Why Ulta Beauty's Stock Looks Gorgeous Today

By Brian Feroldi - Updated Apr 13, 2019 at 1:28PM

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Traders cheer the release of better-than-expected quarterly results and upbeat guidance.

What happened

Shares of beauty retailer Ulta Beauty (ULTA -4.41%) rose as much as 10% in early-morning trading on Friday. The stock was up about 9% as of 12:17 p.m. EDT. The catalyst behind the move is the release of good-looking fourth-quarter results.

So what

Here are the key numbers from Ulta's fiscal 2018 fourth quarter: 

  • Revenue jumped 9.7% to $2.125 billion. This figured exceeded guidance and beat the $2.1 billion that was estimated by Wall Street.
  • Same-store sales jumped 9.4% during the period. This result came in higher than management's forecast.
  • E-commerce sales grew by 25%.
  • Gross margin increased by 90 basis points to 34.9%.
  • Net income grew 3.1% to $215 million. Share buybacks helped propel EPS up 6% to $3.61. This number beat the consensus estimate of market watchers by a nickel.

It is also worth pointing out that the year-ago quarter featured an extra week. If you adjust for that effect, revenue and EPS would have grown by 16% and 31%, respectively.

Check out the latest earnings call transcript for Ulta Beauty.

Makeup display with lipstick and accessories.

Image source: Getty Images.

Here's a review of the results from the full fiscal year 2018:

  • Revenue increased 14% to $6.7 billion. 
  • Same-store sales grew by 8.1%. 
  • Net income jumped 18.6% to $659 million.
  • Diluted earnings per share increased by 22% to $10.94. 
  • During the year, 100 new stores were opened.
  • The company spent $616 million to buy back 2.5 million shares of its common stock during the year.

Turning to guidance, here's what management expects will happen in fiscal 2019:

  • The company plans on opening 80 new stores, remodeling or relocating 20 of them, and refreshing 270.
  • Sales are expected to increase in the "low double digits percentage range." For context, Wall Street is currently projecting sales growth of 10.5%.
  • Same-store sales are expected to grow 6% to 7%. 
  • E-commerce sales are expected to grow between 20% and 30%.
  • Profit margin is expected to expand by 10 to 20 basis points.
  • EPS is expected to range between $12.65 and $12.85. The current consensus estimate among analysts is $12.75.

Management also stated that it will no longer provide quarterly guidance. Instead, the company will only provide full-year guidance and update it on a quarterly basis.

Given the better-than-expected results and bullish outlook, it isn't hard to figure out why shares are rocketing higher today.

Now what

Ulta's results prove yet again that some retailers are able to thrive in today's e-commerce-driven world. With management calling for double-digit gains on the top and bottom lines in 2019, long-term investors have every reason to believe that the bull case for owning this stock remains firmly in place.

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Stocks Mentioned

Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
$335.81 (-4.41%) $-15.50

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